Credit Card vs Debit Card – All myths explained

Credit card and Debit card are the most useful financial element of our life. Whether you are in a restaurant or in a multiplex, if you have low cash in your pocket, you can pay any bill you want just with a swipe. The invention of credit and debit cards are really useful in your daily life. Now you can even add your cards into your digital wallet to pay with your mobile devices using apps like Apple pay, Google wallet etc. But no matter how useful it is, still many people don’t know the basic differences between credit and debit cards. Today in this post I’m going to revile all the details about credit and debit cards so that from the next time, you be sure which one actually fits your needs.

To understand the carding system, we first have to understand how every financial transaction works. You see, there is always two sides of every payments you made. Either you have the money in your pocket to pay for the thing you need or you have a good friend who have the money and you can borrow it from him for a certain time. So, if you have the money to yourself, you can purchase whatever thing you need, no question asked. What if you don’t have the money, but need something desperately. You have two options. Either you can wait to save some money and then purchase it or you can borrow the money from someone and then pay him later when you have it. But if you borrow any amount of money from anyone, there are certain extra cost that gets added to it. Like if you don’t pay the money within a fixed amount of time, you might have to pay a good amount of interest on the amount you have borrowed or the person/organization can sell your stuffs to get back the money.

Well, how these relates to cards?

Credit and debit cards hold two completely separate meaning, though their names are almost similar. If you have a debit card and you make any transaction using your debit card, it’s like paying the bills from your own money. When you make any transaction using the debit card, the amount gets immediately deducted from your savings account you have with that respective bank whose has authorized your debit card. So, no matter how many transactions you made, if you have that cash on your account, it will go smooth without asking a single question.

On the other hand credit cards works just like small loans so that you can still do financial transactions when you don’t have enough money in your bank account or in your pocket. So, it’s like you are borrowing the money from your bank for a certain time with a promise that you will pay it back within a certain time mentioned by your bank on your credit card statement. Credit cards are just like any other bills you get on monthly basis.

What if I don’t pay the credit card bills on time?

Well, if you do that then you might face a lot of trouble including selling your beloved things by the banks or even seize your belongings until you pay the money. Even you can be sent for imprisonment if the bank tagged you as a willful defaulter. Generally if you miss the deadline of paying your credit card bills, banks starts adding an interest rate upon the money you have borrowed so you have to pay more than you have borrowed. Also banks in financially strict countries (like India) don’t provide credit cards to anyone before evaluating you assets, so that they can be sure of getting the money back if you become a non performing asset to the bank. If you keep missing the deadlines for a long time, the bank will first sent you a notice asking you to pay the remaining amount. If you still didn’t pay bank, the bank will go to court and will seize your belongings to get back their money.

Then should I not take credit cards?

Well that is completely up to your needs. If you are a person who needs money in middle of months, but sure of that you can pay them back on the beginning of next month, then credit cards won’t be a problem. But if you are shopaholic person who loves to do shopping without even thinking about the strength of his own pocket, you better stay off from credit cards.

What about international transactions?

There is a myth that only credit cards works for the cross currency international transactions and debit cards are just for domestic use. This is a completely wrong idea and there is no such barrier between credit cards and debit cards transactions. In some countries (like India) who has strict financial policies and not much people are well educated in terms of banking knowledge, banks generally blocks international cross currency transaction on both credit and debit cards to reduce the cyber fraud attacks on the cards. But these is something forcefully implemented by the banks and this is not a general problem with debit cards.

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Another problem with international transaction is that some country uses 3D Secure Pin, an extra layer of security to reduce the fraud attacks. So, by default the card stayed blocked for all other payment gateways who does not uses that security layer. Please note that not all country does this to annoy their debit or credit cards users. But some country does, like India for instance. But there is always a way out and even few banks in India will allow your use your card for international transactions.

What about VISA, MasterCard etc. Who is best?

There is another myth in the worth of credit and debit card. Some say that VISA is better than MasterCard and some would say the opposite. It’s a long running debate for decades. But trust me, there is no difference between that. VISA, MasterCard, American Express etc. are nothing beside card issuer who issue international cards, so that they can be used internationally anywhere around the world, either physically or online. VISA and MasterCards are two most popular card issuer in the world, but as I said earlier, there is no special advantage on any of this cards if no extra barrier has been added by the banks on a specific country. Like in India no matter what card you have, you won’t be able to do online international transactions (except few banks) because of the extra barrier added by Indian Government and this is something card issuing companies like VISA or MasterCard can’t do anything about it.

Beside VISA, MasterCard some country does have their own card issuing authorities with their own branding, like RuPay, ChinaPay etc. RuPay cards are issued by National Payments Corporation of India (NPCI) to provide free debit cards to the savings account holder under Pradhan Mantri Jan Dhan Yojana (PMJDY) and to compete with VISA, MasterCard in Indian market. These cards are good for domestic usage but useless for online international transaction due to the financial rules in India. Beside no one can do anything about it as the card issuer is also an Indian Government organization.

Are credit cards more risky than debit cards?

Well internationally most cards uses only a single tier authentication approach. So you don’t need any 3D secure pin to use it on websites. So to complete a transaction, all you need is the details printed on your card. Now if your cards get stolen or forged by somebody your credit card bills can go way up than you expected. Though if you cannot recognize a transaction on your credit or debit card statement, you can always ask your bank to issue a chargeback for that particular transaction to get back your money.

Due to all this issues countries with strict security policies uses 2 tier authentication approach by using 3D secure pin for both credit and debit cards. Beside this some country also uses chip based credit and debit cards so that they cannot be forged by any means. But from my personal experience I will say that if you do not share your card information with others and follow few basic security steps, it’s hard to forge any card. So, in short it’s not just credit cards, if you don’t know the basic security practice then anything can be risky to use.

Why most international websites ask for credit cards?

Most of my reader ask me why most international website ask for credit cards instead of debit cards and the answer is very simple, it’s because of the financial structure of most developed countries. You see, in countries like USA, UK etc. opening a bank account is very costly and even in some country, you have to pay a monthly fee to the bank to hold your money. But getting a credit card is very easy in these countries. You just need few minor approvals to get a credit card. Whereas in India, banks open a savings account for free of cost under PMJDY and even pay your quarterly interest on the amount you keep in your savings account and on the other hand it’s really hard to get a credit card, if you don’t have a decent job.

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So, for this reason, most international users are familiar with the credit cards rather than debit cards. Also there are few exclusive features which only comes with credit cards, like EMI. Generally most debit cards don’t allow you to get an EMI option of payment, but credit cards will. For these main reason most international websites (as mostly they are situated in US or UK) ask for credit cards rather than debit cards. But if you have a debit card which is activated or international usage then it will work fine on all website whether they ask for only credit card or both credit and debit card. As it’s all about if your card is allowing that particular transaction or not, nothing else.

Conclusion

So, from next time if someone tell you any myth about credit cards or debit cards, try to tell them the truth and share the banking knowledge with others so that they can also take the right decision. Is there anything which you think I’ve missed in the above article? Do you have any exited story about your credit or debit card experience? Let me know in the comment section below. I will be happy to hear every single one of them.

25 Comments

I read your full details about debit card v/s credit card with lots of interest.. I must Say One thing.. Bro, I am really very glad to be part of your site, and speak loudly that : “What Bengals Think Today India Thinks Tomorrow & The rest of the world thinks lots of late!!” i really appreciate your work and dedication for normal people, to help them.. As A Part of being bengali culture, you are great..

Credit cards are most preferred method of payment in International websites because , most of the international website which require credit cards are providing services whose payments are recurring every month, they charge per month ,where as in India most website have annual prices and as credit cards are pre – authorized to transact in negative amount it makes the website to get the payment easily , and in any other website which sells product do have Visa-Debit-Electron or Maestro , JCB and Discover for debit card payments.

I wish to make purchases on Google play store , please tell me which debit card can I use for this purpose. I currently hold a Canara Bank MasterCard debit card , a SBI Classic Visa Debit card and a slonkit card. Will it require me to open a new account in banks like AXIS ? And if I do so , is there any specific card I should request for ?

Hai bro. I have applied for hdfc credit card just for the purpose of making cross currency or international transaction in online in the name of my grandma bcoz she has more salary but she is a P.H WORKER. so they are not approving for tgis reason.

But the guy who is a agent he says if not this i will try to get a sbi credit.

Will sbi credit cards allows to purchase a product in a international website like in usa. Plz clarify

Thanks Man !!!!! I was really tired of reading articles about this on American sites ,with irrelevant stuff for an Indian like me.Finally found your site and it is AWESOME. Heaps of thanks !!!!! But one thing , what exactly is 3D secure Pin ? Is it that OTP confirmation before each transaction ?? Would love more light onto that + If many popular international sites don’t support it, how are some banks like HDFC,ICICI etc .. are able to make their cards work ? Are they not complying with RBI’s policy ?? Or something else ?? Will definitely appreciate if you help me understand that ?! 🙂 …. + Your article is really great and so is your site !!! Absolutely BRILLIANT 😀 . Thanks for answering in advance.

3D Secure Pin is an alternative to OTP. In case of OTP the bank send you a code that you need to enter to complete the purchase and in case of 3D Secure Pin you create a secret pin for your card and you need to put for completing the purchase. HDFC, ICICI are not doing any migical thing. Each back has an option in the backend which will allow their cards to be using in both gateways which has or hasn’t integrated with 2 tyre authentication (like most international gateways), but public banks kind SBI, PNB think of their customers as underrated ordinary basic people that is why they don’t think their customers will ever need anything besides saving account, current account, recurring deposit, FD and loan. On the other hand banks like HDFC, ICICI, Axis, IndusInd give priority of each and every user’s requirement. You can know more about 3D Secure Pin here.

“But if you have a debit card which is activated or international usage then it will work fine on all website whether they ask for only credit card or both credit and debit card” are you sure that I can use debit card if it is mentioned as credit internationally unlocked ?

also it would be better if you write a article like this one [LINK REMOVED] is where to use credit card and where to use debit card in view of India.

as far as I understood credit card is kindof secure as if you pay via credit card you can cancel it if you find it fraudulent but in the case of the debit card it is charged instantly!

Hi Vidhan, As I stated above in the article, if you have an Indian Debit card and you have enabled international cross currency transaction on it, you can easily use it anywhere even the site is asking for credit card. For example, stripe (a popular payment gateway) only uses credit card, but I have purchased many things from sites which uses stripe payment gateway using my ICICI Debit card without any issue.

Also there is no such thing for where you should use a credit card and where a debit card, especially for India. Because the only difference between a credit & debit card is that in case of credit card you are purchasing something in credit and you will pay later to your bank. In case of debit card you are paying from your bank balance.

Now if you like to live your life in credit, then only credit card is a good option for you. But you must remember that if you are unable to pay your credit card bill on the next month or so, the bank will charge interest on your credit amount. That is why, personally I feel more safe with debit card as you know how much money you have in your bank and how much you can spend.

In terms of feature, there is no major difference. If you purchased something internationally using your debit card and then initiated a refund or if there was a fraudulent purchase using your card details and you have claimed a chargeback, the money will automatically gets credited to your bank balance. In case of credit card it will be adjusted in your monthly billing amount.

For now I have a SBI card and online account which works perfectly fine for India, but internationally it sucks! but can be considered as kind of secure as some cyber criminal from another country can’t use them 🙂

Thanks for the assurance that fraudulent transaction will be treated in both the manner, now I get trust debit little bit more 🙂

So then I will stick to debit card as I am also not having a steady inflow of income and I am pretty sure that the rate of interest will be much higher!

but only thing that I hate about ICICI is that it doesn’t have a provision to open zero balance accounts like SBI even thought few branches accept zero balance accounts they only provide rupay debit cards! or should have a 10k min balance, which is again a risk! to put if I am using it for international transactions, need to ask them in person!

what I have in my mind was to open a different account in ICICI and use the account only for the international transaction and by keeping the balance zero, ie transfer the required amount to that bank account only when I want to do international transaction from my SBI account!

I googled about stripe 🙂

Thanks for the article it cleared my doubts and now only thing left for me is to open a new bank account and try for zero balance with international credit card

Well there is a huge financial reason why most private bank don’t provide ZERO balance account. You see, for any bank the only profit they make from your account if there is any termed deposit (financial term). General savings account doesn’t fall into term deposit as bank cannot use your money in the “money market” to make profit from it. As you can withdraw your money anytime you want. However this is not the case for fixed deposit, recurring deposits etc. As those amounts are fixed for time being and you cannot withdraw it. So, bank makes profit from your money by inventing it in the money market.

The same kind a idea works for MAB (minimum acc balance maintenance). If you open an account with MAC Rs. 10,000/- then bank can always invent that money to the money market to make profit from it. This is because you are obliged to keep that money in your acc for each quarter.

In case of PSU banks, there is Govt. to back them in case of financial need but that is not the case for private banks. The quality of service most private bank provides (like ICICI) takes a lot of money to constantly maintain it. Like for example banks needs to run a lot of checking for each international transaction to make sure they are not fraudulent or any bad things like that. PSU banks don’t care about their customer experience and improving their service quality, but private bank does and they cannot provide you a high quality service unless they are making good profit. It’s all about money in the financial market. It is literally the money game.

I agree with you 100% I will try if it is possible to get a zero balance and a international debit card in the nearest ICICI one or will try looking at a alternative bank in which I can do the international transaction!

I tried to stick with my current SBI and tried working around it using Virtual Cards but they are also virtual card from an Indian bank, so they cann’t be used without 3d secure pin!

for now I am using my paypal to receive payments and I was paying international transactions from my friends card!

when looking in the online the MAB looks more than 10k I will check in the nearest bank! for me 25k is very high considering that I am coming from a zero balance account!

WOW! 25K MAB? That’s too much. I live in a metro city still ICICI bank charges somewhat between 5K to 10K as MAB but definitely not more than 10K. In that case, you can go with Indian Bank EMV World MasterCard. But you might have to argue a lot with the branch manager to get approval for this card.

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Hi, I'm Saumya Majumder, an engineer, tech enthusiast & programmer. Here in this blog I write mostly about starting & managing a blog, WordPress, Social-media, SEO and Making Money online, Adsense, latest tech products and software and many more thing. If you are also into the tech arena, you will definitely love the content of this blog (I hope).

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